The property market is in a “flat-spot” at the moment, according to most of the media hype out there. So what do you do? Well, the opposite of what everyone else is doing.
If your an existing property owner, do you sell up, keep paying off the mortgage or upgrade to a better house / better suburb while the prices are “flat”?
If your a still-to-be 1st home buyer, looking at the property market from the outside, like looking into a fish bowl, is this the right time to buy?
Well my best financial advice is to do the opposite of what everyone else is doing.
If people are sitting on the side-lines, doing nothing, saying the property market is flattening out or worse, over supplied & in a price reduction cycle, then now is the time to jump in. But only if the timing is right for you personally. Education and being in the right frame of mind and financial position is key.
The rich out there understand that when the market is like this, this is the time when the best opportunities come along, and you can pick up the most profitable investment deals.
While the middle class come in at the peak of the market, when everything is looking Rosy, when the auction clearance rates are running at their best, and then they overpay. For their family home.
While the poor, they keep renting, or living in their modest home try and get out of debt. The rich are trying to get into as much debt as possible. Investment debt.
But how does the average person or couple, with the average or below average salary afford a property at the median price? Most capital cities now have median values around or above the $500k mark.
Well back to my comment, do the opposite of what everyone else is doing.
Stay at home with the parents longer, or if you are already renting, keep renting something affordable, and buy an investment property at the same time. Renovate & add value where you can, and one-day when the value has increased, borrow against that property to buy your own home, or better, another investment property.
The longer you can delay your need for self gratification by living in your “dream home”, the richer you will become by being an investor.
Property investment in Australia can produce amazing results, but only if its done right.
There are many people out there, who have say the $250,000 mortgage, on their family home that they have lived in for several years, which now could be worth $500,000 or more. They borrow against the equity, to buy an investment property. They think they are doing something smart, but at great risk to their residence and lifestyle.
Why risk the family home and all you have worked so hard for, just to have an investment property with a, lets be honest here, 120% mortgage on it, heavily negatively geared?
The right way to do the investment it is to pay a 10-20% upfront deposit, with real cash savings, rent it out and within 5 or so years it should become positively geared. Then you can leave it positively geared forever. If the prices go up comfortably, then borrow against that property to buy another. The investment property. Not the family home.
Better yet, save up another 10-20% with real cash savings, and borrow the rest to invest again. Then you will have 2 investment properties, close to positively geared on both, and getting richer and richer every year with the cash flow. The more and more times you can do this throughout your lifetime, you will be seriously rich by the time retirement age comes around.
“But what if the prices fall” i hear you say. Well that is irrelevant. Because once you have the property, the main aim should be cash flow from the rental income. Not capital gains. Capital gains is only the sweetener. But you should expect good capital gains over the longer term. As the inflationary environment we live in is designed for it.